a.complements since the coefficient on M is positive.
b.substitutes since the coefficient on M is positive.
c.complements since the coefficient on is positive.
d.substitutes since the coefficient on is positive.
-The estimated demand for a good is where Q is the quantity demanded of the good,P is the price of the good,M is income,and is the price of related good R.If the price of the good rises by $10,all else constant,the quantity demanded will ________ by ________ units.
A)increase; 16 units
B)decrease; 160 units
C)decrease; 1.5 units
D)increase; 150 units

Question

a.complements since the coefficient on M is positive.
b.substitutes since the coefficient on M is positive.
c.complements since the coefficient on  is positive.
d.substitutes since the coefficient on  is positive.
-The estimated demand for a good is  where Q is the quantity demanded of the good,P is the price of the good,M is income,and  is the price of related good R.If the price of the good rises by $10,all else constant,the quantity demanded will ________ by ________ units.
A)increase; 16 units 
B)decrease; 160 units 
C)decrease; 1.5 units 
D)increase; 150 units

Quizplus · Accepted Answer

The estimated demand function shows that the coefficient on the price of the good is negative, which indicates that the good is a normal good and obeys the law of demand. Therefore, if the price of the good increases by $10, the quantity demanded will decrease. The magnitude of the decrease can be calculated by taking the absolute value of the coefficient on the price of the good and multiplying it by the change in price (10). Based on the estimated demand function given, the absolute value of the coefficient on the price of the good is 16, which suggests that the quantity demanded will decrease by 16 * 10 = 160 units.

A.complements Since the Coefficient on M Is Positive